Depreciation on investment properties is quite often overlooked by first time investors so to ensure you are getting the best return from your investment properties, make sure you have a depreciation schedule in place and it is up to date for tax purposes.
What is a depreciation schedule and why do I need one?
Depreciation refers to the reducing value of an item as it is used over time and slowly wears out. There are two types of depreciation deductions you can claim on your investment property – depreciation on certain appliances and “moveable” items in the property (eg. ovens, hot water systems, air conditioning units etc.) and depreciation on the building itself (eg. doors, roofing, windows etc.) – (please visit the ATO website for more info)
In order to claim the depreciation of these items at tax time, you will need to have a comprehensive list to provide to your accountant which details all items separately as they will all depreciate at a different rate. But I don’t have a depreciation schedule!
If you did not organise a depreciation schedule at the time of purchasing your investment property, you can start one now so you can claim your deductions in future tax returns.
How do I get a depreciation schedule?
Unfortunately, the tax office will not just take your word for the estimated value of your items so you will need to engage a qualified Quantity Surveyor to complete a thorough inspection of your property and work out what you can claim and its current value. Once you have your depreciation schedule in place, it will just be a matter of keeping it up to date each year.
Have a question or require more info about Depreciation schedules?
Tuckfields can put you in contact with a team of property depreciation specialists to assist you in getting your paperwork ready for tax time. Please contact our office on: (08) 8344 1215 if you would like a referral.
Please note that the information contained in this article is of a general nature only and does not constitute legal advice. Tuckfield Conveyancing does not take responsibility for any errors or omissions obtained from the use of this information.